Dept Of: What Part of $3.50 A Gallon Don't You Understand?

Back in May, NY Times Know-It-All, Tom Friedman wrote (paywall) of General Motors' current business strategies,

"Surely, the sooner this company gets taken over by Toyota, the better off our country will be.

Why? Like a crack dealer looking to keep his addicts on a tight leash, GM announced its "fuel price protection program" on May 23. If you live in Florida or California and buy certain GM vehicles by July 5, the company will guarantee you gasoline at a cap price of $1.99 a gallon for one year — with no limit on mileage. Guzzle away."

And while GM officials immediately attempted to rebut his over-the-top but valid complaint, they have not yet shown any ability to you know, adapt to changing market conditions.

NY Time Reporter, Nick Bunkley writes:

As gasoline prices surge past $3 a gallon in most of the country and closer to $4 in some cities, sales figures show Americans are snapping up small cars that go easier on fuel and on their wallets. But none of the smallest cars are designed or developed by Detroit companies, which in the face of high gas prices are now highlighting another kind of automobile not usually thought of as energy efficient: the muscle car.

Ford Motor said Wednesday that it planned to build a 325-horsepower version of the Ford Shelby GT. It also plans a big luxury car, the Lincoln MKS, which will become the struggling brand’s flagship sedan. The announcement came at an industry conference here sponsored by the Center for Automotive Research.

On Thursday, General Motors is expected to confirm that it will resurrect one of its most famous muscle cars, the Chevrolet Camaro, which was a hit at the Detroit auto show in January. . .

Ford or Chrysler sell no subcompacts in the United States, even though they or their corporate parents sell them in other global markets.

By contrast, Toyota, Honda and Nissan have all introduced small cars in the last few months, all of them sold overseas.

“It is a mistake and it’s very disappointing,” said John Casesa, managing partner of Casesa Strategic Advisers in New York. “I just think it shows that Detroit still has a business model predicated on low energy prices."

Even while dangling the new shiny in front of the legacy market of muscle car fans (and believe me, I lust after those new Mustangs and Chargers even while acknowleging that they are Bad) the invisible hand of the marketplace is forcing changes on GM. From the Wall Street Journal,

Chief Executive Rick Wagoner said the company will slow production of its new lineup of large sport-utility vehicles during the second half of the year to cope with rising inventory as average U.S. gasoline prices stay at more than $3 a gallon.

Any slowdown in production of large SUVs could put a dent in GM's bottom line, as the vehicles are substantially more profitable than the small and midsize cars more Americans have been buying as gasoline prices have soared. The move highlights the risks in GM's strategy of relying on its lineup of large SUVs to propel its North American turnaround in the near term. . . .

According to Ward's, GM built 106,334 Chevy Tahoes in January to June. According to Autodata Corp., 84,933 were sold in the same period, a 4.2% increase from a year earlier.

As of the end of July, GM and its dealers had 82 days' supply of unsold Tahoes, 89 days of unsold GMC Yukons and 75 days of unsold Chevrolet Suburban ultralarge SUVs. Historically, auto makers have aimed for a 60- to 65-day supply, or less, to avoid resorting to profit-draining discounts to clear stock.

Mr. Wagoner said GM won't shut down SUV production lines but will curtail "some" overtime and introduce other products into the production mix. He didn't disclose further details. At least one of GM's production plants is capable of building both full-size SUVs and pickup trucks, and GM is about to launch new versions of its full-size pickup trucks. "We've been basically running all-out," Mr. Wagoner said.

Compare that to Toyota which in July, surpassed Ford and Daimler-Chrylser to become the number two seller in the U.S. market. Although sales of the Toyota Tundra pickup are down too (10 percent year-to-date) the revitalized RAV4 and new subcompact Yaris are flying out the door. The Yaris sold 10,000 plus in July alone.

I took a good amount of stick from The Union Thug and his buddies when I bought my Toyota Matrix. But you know what? G.M. and Ford are doing a disservice to their shareholders, their (union) employees and the country as a whole by continuing to be completely clueless about the changing shape of the marketplace. One would think that having gotten their asses handed to them in the 1970's -- when upstarts Nissan (then Datsun), Honda and Toyota first cracked the North American market -- they would have learned their lessons. They certainly had no shame about learing all they could about lean manufacturing, just-in-time supply chains and total quality managment from the Japanese in the '80's. But apparently the ability to see past the immediate quarterly earnings horizon; to synthesize larger economic and sales data into a proactive strategy; to design products that are both market appropriate AND sexy... Apparently these are skills that are forever beyond the ken of the multimillionaire leaders of America's last great industrial manufacturing sector.

It used to be a truism -- and in a macroeconomic sense still is to a degree -- that what was good for G.M. was good for America. It looks more and more to me that the best thing that could happen to G.M. would be for it to fail and let Schumpeter's creative destruction create a worthy successor from the ashes. If it is owned by Toyota, so be it. At least American workers will have reliable jobs turning out automobiles that Americans can afford to drive now and in the future.